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Bank’s borrowing from CBN increases by 79% to ₦12 trillion in 8 months

The spate of intensified borrowing by merchant and commercial banks from the Central Bank of Nigeria (CBN) has indicated an increasing reliance on the apex bank for liquidity.

According to data sourced from the CBN, commercial banks and merchant banks borrowed a total of ₦12.46 trillion from the apex bank from January to August this year.

This amount indicates a Year-on-Year increase of 79% when compared with the ₦6.96 trillion recorded in the first eight months of 2022. This increased borrowing which dominated the first months of the year was traced to the CBN’s new naira note policy, a development that created a cash crunch in the economy.

Commercial banks and merchant banks make use of two windows to either access funds or make deposits with the CBN.

The Standing Lending Facility (SLF) window is used by banks to access liquidity to run their day-to-day business operations, while the Standing Deposit Facility window(SDF) is used to deposit cash with the apex bank.

The steady increase in banks’ borrowings from the SLF reflects the increase in currency outside banks and currency in circulation (CIC) in the economy. In the first five months of 2023, the borrowing from the CBN intensified as it recorded ₦7.5trillion, an increase of 276% from ₦1.99 trillion reported in the first five months of 2022.

The figure further increased in the first six months (H1) to ₦10.25 trillion, representing an increase of 138% Year-on-Year (YoY) from ₦4.3 trillion borrowed during the corresponding period of H1, 2022.

A monthly breakdown of the figures borrowed from the CBN in 2023 revealed the sum of ₦528.16 billion was supplied to banks in January. The figure dropped to ₦453.7 billion in February 2023. There was a significant increase In March as the figure rose by 776.22% to ₦3.98 trillion.

In April 2023, the sum of ₦4.47 trillion was borrowed by banks from the CBN.

For May and June 2023, the sum of ₦590.29 billion and ₦235.06 billion was recorded respectively, as the amount borrowed by the banks from the CBN while the figure stood at ₦908.43 billion in July and ₦1.3 trillion in August.

From the above analysis, the month that recorded the highest borrowing by banks was April with ₦4.47 trillion, seconded by March which recorded an SLF figure of ₦3.98 trillion.

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